Average Person Spends $250 Per Year on Legal Services

Wouldn’t it be cool to be able to peer into the future and see what it holds?

Some law professors get paid to do just that.

William Henderson is one of them. The Indiana University professor was named the year’s Most Influential Person in Legal Education by National Jurist magazine.

He earned that designation by being a great teacher and writer. He is able to turn otherwise dull, dry statistics into fascinating insights. In that regard, he is sort of the Bill James (Google him, non-baseball fans) of the law.

Susskind consults with law firms – and governments – all over the globe about technology and trends. He holds the heady title of IT Adviser to the Lord Chief Justice of England and Wales, and he made waves with his concept of “The Grid,” a model used to predict the future of the legal profession.

$250 Annual Budget for Legal Services

In a recent blogpost, Henderson crunched U.S. Census data and law firm billing receipts to discover who is consuming legal services and how much they spend each year. His findings:

· The average individual spends less than $250 per year

· The average Fortune 500 company spends $10.7 million

Regarding the big money legal market, he writes: “[A] relatively small roster of large corporations are spending vast sums each year on legal services – more than $10 million per year for a publicly held company. Because large national and international corporations are awash in a sea of growing legal complexity, they are turning to technology, process, and data to keep legal costs in line with overall company revenues.”

Regarding the individual legal market, he writes: “[T]he $232 annual legal spend per citizen means that there is not enough money go around to pay for all the legal need. If a middle-class professional couple with kids has a contested divorce, that could easily chew-up $50,000 to $100,000 in legal fees. A DUI is likely to cost $1,500. Probate work runs well into the thousands. In reality, most citizens go without…. To my mind, technology is the only vehicle for tapping into a large latent market for legal services. LegalZoom, Rocket Lawyer,Modria, Shake, and many other legal technology companies all see the potential here. And so do the venture capital and private equity firms that are funding them.”

The old law practice model no longer works. “[I]f you have radically innovative new ideas over the ways in which you might engage your clients or in which you might resource your delivery, then you will quite naturally see that you need new sets of people; you need new systems; you need to invest in processes; you need to set up perhaps a power plant or a factory to undertake the more routine work.”

The big question. “Possibly the biggest strategic issue facing any law firm in the world today is the extent to which they continue doing routine and repetitive, administrative, process-based work. What clients are saying is ‘we don’t mind paying law firms high fees for the difficult stuff, but on a big dispute, if you look at the document review exercise, or on a big deal, if you look at the due diligence exercise, we don’t really need expensive young people in expensive buildings in expensive cities doing this.’ The question then arises: What is your alternative sourcing strategy? How, as a law firm, are you going to undertake that work?”

Three drivers of change. Cost pressure, liberalization and technology. “The cost pressures are pretty overwhelming for clients just now. They’re saying they need to reduce the legal spending by 30-50 percent. They’re also saying we don’t mind paying for the experienced lawyers at the top of the pyramid; the law firms are going to have to rethink the bottom of the pyramid. I don’t think it’s going to change in the next two years. Probably over a period of 10 years we’ll see this change, but we’ll see a very different business structure emerging.”

What do you think the future holds for our profession? What steps are you taking to be prepared?

Jay Reeves a/k/a The Risk Man is an attorney who has practiced North Carolina and South Carolina. Formerly he was Legal Editor at Lawyers Weekly and Risk Manager at Lawyers Mutual. Contact him at jay.reeves@ymail.com.

About the Author

Jay Reeves

Jay Reeves practiced law in North Carolina and South Carolina. Over the course of his 35-year career he was a solo practitioner, corporate lawyer, legal editor, Legal Aid staff attorney and insurance risk manager. Today he helps lawyers and firms put more mojo in their practice through marketing, work-life balance and reclaiming passion for what they do. He is available for consultations, retreats and presentations.